‘Fear factor’ hits the AI power boom

{"text":[[{"start":7.2,"text":"The AI gold rush turbocharged interest in emerging technologies like small modular nuclear reactors, geothermal energy and fuel cells, bringing in billions of dollars in investment and commitments from some of the biggest tech companies in the world."}],[{"start":21.52,"text":"But some of these AI-linked companies are now looking vulnerable as investor wariness has risen in previous months, knocking share prices even before US midterm victories for Democrats who could move to create legal blocks on data centre projects."}],[{"start":35.88,"text":"“The fear factor has set in,” said Chris Dendrinos, US clean energy lead at RBC Capital Markets. “If moratoriums slow down data centre development, that weighs on demand for these companies.”"}],[{"start":48.88,"text":"Shares in small modular reactor specialists Oklo and X-energy, fuel cell company Bloom Energy and geothermal developer Fervo Energy have all come down from peaks in the past 12 months."}],[{"start":61.44,"text":"Technologies such as SMRs, fuel cells and geothermal carry higher costs than natural gas and renewable energy."}],[{"start":68.72,"text":"But long wait times to connect to the grid, shortages of gas equipment and the intermittency of solar and wind have prompted hyperscalers and investors to back these alternative energy sources."}],[{"start":null,"text":"

"}],[{"start":79.8,"text":"This interest sent share prices soaring earlier this year. It has also meant the pressure is acute for companies to keep spending heavily to get projects to completion."}],[{"start":89.6,"text":"“Instead of letters of intent, [the project developers] need binding offtakes. If they don’t, the cash they have isn’t enough to carry them,” said Rahul Jasuja, head of energy and energy transition at Cohen & Company Capital Markets."}],[{"start":103.44,"text":"Nuclear start-up Oklo, which is targeting its first reactor deployment by the end of the decade, has raised $2.25bn by issuing new shares this year and has net cash of over $3bn but faces substantial construction costs before it can generate electricity."}],[{"start":120.56,"text":"Geothermal developer Fervo Energy, which is sitting on a $1.9bn cash pile, said this week that it will spend as much as $500mn in the fourth quarter. A larger project finance package is in the works for next year as well. Chief executive Tim Latimer said this week the greater “microscope” on data centre power plants would benefit hs company because of its zero-emission technology."}],[{"start":142.76,"text":"Oklo said: “We believe we have the resources and capital to complete [reactor project] Aurora-INL. Our balance sheet gives us the flexibility to continue funding planned work as projects progress.”"}],[{"start":156.36,"text":"More established companies are also feeling the impact."}],[{"start":160.48,"text":"Nuclear specialist Holtec International withdrew plans for a flotation in September that would have raised $900mn at a valuation of $10bn to help finance its reactor development."}],[{"start":172.28,"text":"The turbulence in equity markets will also raise question marks over plans by Westinghouse Electric, the US nuclear reactor design and services company, to push ahead with a planned flotation."}],[{"start":183.52,"text":"It has ambitions to build up to 10 large-scale reactors to supply power to meet surging electricity demand from data centres."}],[{"start":190.68,"text":"“Capital markets bankers are trying to thread the needle on deals right now,” said Michael Alfaro, chief investment officer of Gallo Partners, an energy and industrials-focused hedge fund."}],[{"start":201.12,"text":"“Westinghouse is actively planning its IPO. The sell-off in [independent power producers] and other nuclear assets is likely to weigh on investor sentiment, which could provide a unique opportunity to pick up a quality asset at a more reasonable valuation,” he said."}],[{"start":216.48,"text":"The drop in valuations also takes some steam out of the market, potentially bringing buyers back."}],[{"start":222.04,"text":"The share prices of companies like Oklo and X-energy are “getting back to what would be appropriate”, said Adam Stein, director of nuclear energy and innovation at the Breakthrough Institute."}],[{"start":231.72,"text":"“The risk is that if the stock market loses confidence they won’t be able to borrow money to build projects,” he said, although added that valuations tumbling could also reduce volatility as prices more closely “[match] the fundamentals”."}],[{"start":245.44,"text":"Rob Thummel, senior portfolio manager at Tortoise Capital, said the cooling down would just mean hyperscalers such as Google and Meta would just become “more selective about which projects move forward”."}],[{"start":257.169,"text":"“The US wants to win the AI race, which will require building data centres,” he added."}],[{"start":261.76,"text":"Google has signed deals with Kairos Power and Fervo, while Amazon has backed nuclear developer X-energy. Oracle has agreed to procure fuel cells with up to 2.8 gigawatts of capacity from Bloom Energy."}],[{"start":277.76,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794446245_1368.mp3"}